Table: Loudcloud's Lessons for Internet Startups

April 16, 2001, 12:00 AM EDT

DON'T COUNT ON YOUR IPO AS A BRANDING EVENT

The company figured an IPO would raise its status in the eyes of customers. Big mistake. The process took an embarrassing 164 days, and the stock is trading at $4.53, under its $6 IPO price, sullying Loudcloud's reputation.

SHOW THEM THE MONEY

Analysts thought Loudcloud Chairman Marc Andreessen's fame as a Net legend would overcome the startup's losses--$107.6 million in the three quarters ended Oct. 31. But investors didn't budge--they want profits.

YOU CAN'T CHANGE YOUR BUSINESS OVERNIGHT

When dot-coms ran into trouble a year ago, Loudcloud (LDCL
) started targeting large corporate customers. Yet 72% of its customers remain startups, scaring off some institutional investors who passed on the IPO.

KEEP EMPLOYEES IN THE LOOP

Informing the troops of financial changes is key to employee morale. Loudcloud did this well, especially during tough moments like a reverse stock split, where the value of employees' stock plunged by more than half.